Well firstly, I think this should probably be under the "sticking points" category. And secondly, you're being way too hard on yourself man. You aren't having fun and that's why you can't approach. When I first started I would do the exact same thing as you (and still do occasionally) where you walk around for hours trying to get up the nerve to talk to somebody but then pussy out over and over again.
The key is to start small and work your way up. Don't put pressure on yourself to do a direct approach when you can't even ask a hot girl what time it is. That's just setting yourself up for failure. Start by making small talk with everyone. When you order food, instead of ordering and then leaving like everyone else, say the magic phrase "how are you?" to the cashier and then start talking a little. Next talk to an old lady, comment on something someone's carrying or if they're wearing a shirt with a band that you like on it, just say "hey! Nice shirt!" And walk away.
The next step, when you finally start talking to the opposite sex, you want to have fun. This is the key! Make it fun. There's no point in going out if you're miserable because you'll end up giving up on your goal altogether. Do stupid stuff that makes you laugh. Don't be afraid to get a little embarrassed. I did the dumbest stuff you could imagine to get my nerve up when I first started and it took me probably a week of doing this stuff every day before I finally had the nerve to actually try to get a number.
And by dumb stuff I mean openers like, "excuse me, do you know where I could find some weiners? Like hot dogs...or penises." And make an effort to be awkward about it. I find that kind of thing hilarious, so I enjoyed going out. I'd also stand in the stall in the bathroom and when there was plenty of guys around me, I would yell angrily "Aww damnit! Shit! Why does it have to be so small?!!?" And everyone would chuckle in there. It made me feel good and more confident. Then I would go ask for some directions and so on. Just push yourself out of your comfort zone a little bit at a time, and soon you'll look back and you won't be able to believe you were afraid to ask a hot girl where starbucks is.
You can also check out these youtube videos. They are absoluetely hilarious and they always inspire my stupidity. I would watch a couple right before I went out and it helped alot!
http://www.youtube.com/watch?v=lJEf_uNEdHI (This video also has my "penis" opener in it.)
Good luck to you man!